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Mission Grey Daily Brief - October 17, 2024

Summary of the Global Situation for Businesses and Investors

The global situation remains volatile, with several geopolitical and economic developments that could impact businesses and investors. The Moldova election and EU membership referendum are under threat of Russian interference, while Canada-India relations are strained due to allegations of Indian government involvement in the assassination of a Sikh separatist leader in Canada. Ukraine continues to call for US support in its war against Russia, and Taiwan is preparing for a potential Chinese invasion. Meanwhile, Vietnam's economic growth is expected to reach 6.1% by the end of 2024, making it a top choice for foreign investment.

Russia's Interference in Moldova's Election and EU Membership Referendum

The upcoming presidential election and EU membership referendum in Moldova are under threat of Russian interference, with the US accusing Russia of attempting to undermine the vote. Police have raided the office of a pro-Russian bloc, the Victory bloc, amid allegations of election fraud. The bloc was established in Moscow and consists of five parties controlled by a fugitive oligarch, Ilan Shor. The Central Election Commission denied the bloc's registration for the election and referendum due to the similarity of the bloc's name to one of its member parties and the inclusion of a banned party within the bloc.

This situation highlights the ongoing tensions between Russia and the West, and the potential for Russian interference in democratic processes. Businesses and investors should monitor the situation closely, as it could have implications for the EU's relationship with Moldova and the stability of the region.

Canada-India Diplomatic Fallout

Canada-India relations are strained due to allegations of Indian government involvement in the assassination of a Sikh separatist leader in Canada. Canada has expelled six Indian diplomats, and India has responded in kind, pushing bilateral ties to a near-breaking point. The UK, US, Australia, and New Zealand have backed Canada in the investigations, with the US State Department criticising India's stance on the allegations.

This diplomatic fallout could have implications for businesses and investors with interests in both countries. It is essential to monitor the situation and be prepared for potential disruptions to trade and investment.

Ukraine's Call for US Support

Ukraine continues to call for US support in its war against Russia, with Oleksandra Matviichuk, a human rights lawyer and Nobel Peace Prize winner, urging the US to send missiles to Ukraine. Matviichuk argues that global freedom and human rights are under attack, and Ukraine is on the front line of protecting democracies and civil liberties. She warns that if Russian President Vladimir Putin succeeds in his vision of recreating the Russian empire, neighbouring countries in Europe are next, which could lead to conflict with NATO member countries and the deployment of US troops.

The situation in Ukraine remains a significant concern for businesses and investors, particularly those with operations or investments in the region. The ongoing war and potential for escalation highlight the importance of risk assessment and contingency planning.

Taiwan's Preparations for a Potential Chinese Invasion

Taiwan is preparing for a potential Chinese invasion, with citizens being instructed to have go-bags ready and be prepared to fight. China claims sovereignty over Taiwan and has conducted military drills near the island, with US intelligence reports suggesting an invasion could happen as early as 2027. Taiwanese factories supply around 80% of the world's semiconductors, so an invasion would have ramifications beyond Taiwan's borders, shattering the fragile peace in the South China Sea and impacting the region.

Businesses and investors with operations or investments in Taiwan should be aware of the potential risks and have contingency plans in place. The situation highlights the importance of supply chain resilience and the need to monitor geopolitical developments closely.


Further Reading:

Beware fake news and be ready to resist: how Taiwanese citizens are preparing for a Chinese invasion - The Independent

Opinion: I won the Nobel Peace Prize. Now I'm asking the US to send missiles to Ukraine. - USA TODAY

Police raid pro-Russian Victory bloc's office in Moldova amid alleged election fraud - Espreso. Global

Russia working to undermine Moldova vote: US - wnbjtv.com

UK joins US and Australia in backing Canada over India assassination row - The Independent

What is behind Vietnam's economic success story? - DW (English)

Themes around the World:

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Security Operations Impact on Business

Intensified anti-crime operations in Rio de Janeiro targeting organized crime cartels have led to significant casualties and increased security measures. Enhanced security reduces risks for businesses and expats, supporting continuity in logistics, tourism, and urban operations despite short-term disruptions.

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MSCI Frontier Market Inclusion and Market Visibility

MSCI's inclusion of Pakistani banks and small-cap companies in its Frontier Markets Index enhances Pakistan's visibility to global investors. This recognition improves foreign research coverage and capital access, signaling gradual equity market diversification. However, translating this visibility into predictable policy and stable investment conditions remains essential to sustain investor confidence.

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Labour Market Weakness in Economic Hubs

Toronto, a major economic engine, is experiencing rising unemployment rates, reaching nearly 9%, with youth unemployment particularly high. Factors include trade war impacts on manufacturing and transportation sectors, a slowdown in construction, and high household debt burdens. Labour market softness threatens consumer spending and economic vitality in key urban centers.

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Decline in Russian Crude Exports and Market Impact

Russian seaborne crude shipments have sharply declined due to sanctions and buyer caution, causing a surge in oil held at sea. Major importers—India, China, and Turkey—are reducing purchases, disrupting supply chains and pressuring Russia’s export revenues. This dynamic contributes to global oil market uncertainty, with potential short-term supply constraints and price volatility.

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Impact of US Economic Policies and Global Trade Tensions

US policy uncertainty, including tariff wars and interest rate volatility, continues to reverberate through Australian markets. The interplay between US-China tensions and global trade dynamics affects commodity prices, export demand, and investor sentiment, requiring Australian businesses to adapt supply chains and diversify markets.

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Foreign Direct Investment Challenges

Despite recent improvements in investor confidence, Pakistan faces a significant outflow of multinational corporations due to high energy costs, regulatory uncertainty, and political instability. The exit of major firms like P&G and Microsoft signals systemic issues undermining long-term FDI retention and economic growth prospects.

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Currency Exchange Rate Fluctuations

The Pakistani rupee exhibits volatility against major currencies, influencing import costs, export competitiveness, and inflationary pressures. Exchange rate instability complicates financial planning for businesses and investors, affecting trade balances and foreign investment decisions. Central bank interventions and fiscal policies will be crucial to stabilize the currency and support economic confidence.

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Financial System Resilience

Despite external shocks and market volatility, Irish households, businesses, and banks maintain relatively healthy balance sheets and low debt levels. The domestic banking system has demonstrated capacity to absorb severe shocks, supporting economic stability. However, risks remain from non-bank lending practices and potential market corrections.

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Robust Non-Oil Private Sector Growth

The non-oil private sector in Saudi Arabia is experiencing exceptional growth, with PMI reaching 60.2 in October 2025, signaling strong business activity, rising demand, and employment. Government initiatives and mega-projects like NEOM and The Red Sea Project have catalyzed private sector expansion, job creation, and increased foreign investment, reinforcing economic diversification efforts.

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Strong GDP Growth and Economic Resilience

Vietnam's GDP growth exceeded 8% in Q3 2025, with forecasts raised to 7.5-7.9% for the year. Growth is fueled by steady trade, robust FDI inflows, and recovering domestic demand. The country benefits from stable macroeconomic policies, expanding industrial infrastructure, and a strategic role in global supply chains, positioning it as a bright spot amid global economic volatility.

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Domestic Consumption and Income Disparities

Taiwan's export-led growth has not translated into proportional wage increases or domestic demand expansion. Rising living costs, especially housing affordability issues, and wealth concentration challenge social stability and limit the growth potential of internal markets.

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Weak Domestic Consumption and Economic Growth

Thailand's economic growth slowed sharply in Q3 2025 due to weak household spending amid high debt and fragile confidence. Private consumption contraction dampens GDP growth prospects despite strong export performance, posing challenges for domestic market-driven sectors and necessitating government stimulus to sustain economic momentum and investor confidence.

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French Companies' Dilemma in Russia

Despite sanctions and reputational risks, 23 major French companies continue operations in Russia, contributing significant tax revenues to the Kremlin. Firms like Leroy Merlin and Auchan generate billions in revenue, highlighting the complex trade-offs between market presence and geopolitical pressures. This persistence underscores challenges in enforcing sanctions and reputational risk management.

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Pemex Financial Strain and Sovereign Risk

Mexico's government has issued over $41 billion in hard-currency bonds in 2025 to support Pemex, the state oil company, which faces $99 billion in debt and declining production. This large-scale fiscal backing raises sovereign risk, potentially crowding out public investment and increasing borrowing costs, impacting Mexico's macroeconomic stability and investor confidence.

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Tourism Sector Vulnerability to Diplomatic Strains

Japan's tourism industry, heavily reliant on Chinese visitors, is severely impacted by China's travel advisories and diplomatic tensions. The decline in Chinese tourists threatens revenues across airlines, hotels, retail, and education sectors. This exposes Japan’s economic sensitivity to geopolitical disputes and underscores the need for diversification of its tourism base to mitigate future shocks.

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Emergence of Russian Stablecoin Policy

Russia is cautiously embracing stablecoins for international settlements and foreign investment attraction, while prohibiting their domestic use to preserve monetary sovereignty and financial stability. This strategic approach aims to leverage digital currencies for cross-border trade amid sanctions, signaling Russia’s intent to innovate within a controlled regulatory framework in the evolving global crypto landscape.

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Yen Depreciation and Currency Volatility

The Japanese yen is weakening against the US dollar amid BoJ's dovish stance and widening interest rate differentials. Currency moves sometimes deviate from fundamentals due to geopolitical factors and fiscal policy speculation. Yen depreciation benefits exporters but raises concerns about potential market intervention and trade tensions, affecting global supply chains and investment flows.

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Foreign Direct Investment Surge

Saudi Arabia is experiencing a surge in foreign direct investment, notably from UAE and Indian companies, driven by economic stability, growth prospects, and Vision 2030 reforms. International firms are increasingly using private equity, venture capital, and joint ventures to enter Saudi markets, focusing on technology, finance, and infrastructure, which strengthens bilateral trade ties and regional economic integration.

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Supporting Industries as Supply Chain Backbone

Vietnam's supporting industries, vital for manufacturing self-reliance, are expanding with over 40,000 enterprises. Multinationals like Samsung and Intel drive quality upgrades, but local firms face challenges in technology, finance, and integration into global supply chains. Government incentives and FTAs aim to boost competitiveness, yet weak linkages and low local content rates limit full supply chain localization.

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Challenges in State Grain Procurement

The transition to a new state grains buyer agency disrupted Egypt's wheat import tender system, causing delayed payments and contract renegotiations. This reduced market transparency and strained supplier relationships, leading to a 25% drop in wheat imports in early 2025. Recent leadership changes aim to restore credibility, critical for food security and import-dependent supply chains.

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Corporate Foreign Currency Borrowing Surge

Japanese firms have dramatically increased foreign-currency bond and loan issuance, surpassing yen-denominated debt sales for the first time. This shift reflects confidence in global markets, a move away from cash hoarding, and a strategic response to domestic monetary tightening. The trend reshapes global credit markets and affects currency exposure, funding costs, and cross-border investment flows.

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Geostrategic Economic Corridors

New economic corridors linking Israel with Africa, Asia, and the Middle East reshape trade and security dynamics. Integration of physical and digital infrastructure under the Abraham Accords enhances regional connectivity, reduces supply chain risks, and promotes energy and climate security, positioning Israel as a key regional hub.

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Rare Earth Minerals as Strategic Assets

Brazil holds approximately 25% of global rare earth reserves, positioning it as a critical alternative to China’s dominance. While commercial production is nascent, the U.S. and allies view Brazil as a key supplier for essential minerals used in high-tech industries. This potential reshapes geopolitical negotiations and investment priorities, though environmental and infrastructural challenges remain significant.

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US Government Shutdown Impact

The prolonged US government shutdown disrupts economic data releases, federal operations, and sectors like transportation, causing uncertainty for investors and businesses. Flight reductions and delayed employment reports undermine market confidence and complicate economic forecasting, affecting investment timing and operational planning.

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Investment Risk Perceptions in Africa

Despite improvements, Africa remains perceived as a high-risk investment environment due to political instability, regulatory uncertainty, and infrastructure deficits. South Africa, while relatively stable, faces challenges that limit growth and investment potential. Regional integration and reform momentum are critical to improving the continent's overall investment attractiveness.

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Stock Market Volatility and Leverage Risks

South Korea's stock market, led by the Kospi index, has surged over 70% in 2025, driven by AI-fueled semiconductor growth. However, rising retail investor leverage and margin loans have heightened volatility risks, with warnings of a potential policy-driven bubble. Regulatory oversight is critical to prevent destabilizing corrections that could impact investment strategies and market confidence.

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Geopolitical Realignment and Trade Diversification

Global trade tensions and tariff escalations, especially between the US and Asian exporters, are reshaping supply chains and investment flows. India benefits from supply-chain diversification opportunities but faces cost-push inflation risks. The emergence of a multipolar world prioritizing national security and manufacturing resilience necessitates India’s policy continuity to maintain growth amid geopolitical shifts.

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Sovereign Credit Downgrades

Recent downgrades by S&P, Fitch, and Moody's reflect concerns over France's fiscal deficits, rising public debt, and political fragmentation. These ratings affect borrowing costs and investor confidence, influencing capital flows and investment decisions. Despite this, the French stock market shows resilience, driven by short-term liquidity and expectations of central bank policies, creating a complex risk-return environment for investors.

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Currency Appreciation and Export Competitiveness

The Thai baht has appreciated by approximately 6.8% in 2025 and is forecasted to strengthen further in 2026. This appreciation, driven by a weak US dollar, fiscal surpluses, and capital inflows, poses challenges to Thailand's export competitiveness by increasing costs for foreign buyers and complicating trade balance management amid global economic uncertainties.

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Thailand's Balancing Act Between US and China

Thailand skillfully balances relations between China and the US, leveraging multiple trade frameworks with China and strategic agreements with the US. This pragmatic approach mitigates geopolitical risks, preserves trade benefits, and maintains regional stability, critical for sustaining foreign investment and supply chain integration in a complex global environment.

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Stable Financial System Amid Global Risks

Indonesia's financial system remained stable in Q3 2025, supported by coordinated policy efforts from key institutions. Retail sales grew 5.8% YoY, and monetary expansion continued, despite global uncertainties like US tariffs and Fed rate cuts. This stability underpins investor confidence and economic growth prospects, influencing foreign direct investment and financial market strategies.

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Construction Market Expansion and AI Integration

Egypt’s construction market is projected to grow at an 8.27% CAGR to USD 55.36 billion by 2033, fueled by urbanization and mega-projects like the New Administrative Capital. AI technologies are revolutionizing project management, resource allocation, and sustainability practices, enhancing efficiency and reducing costs. This sector’s growth supports infrastructure development critical for trade and economic diversification.

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Capital Outflows and Domestic Investment Weakness

South Korea's net foreign assets surged to over $1 trillion, driven by retail and institutional overseas investments. While strengthening external financial soundness, this trend weakens domestic capital markets, pressures the won, and exposes the economy to global risks. Declining domestic productivity and investment may undermine long-term growth prospects, necessitating reforms to boost local investment and productivity.

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Rising Oil Exports Despite Sanctions

Iran's crude oil exports have reached a seven-year high of approximately 2 million barrels per day despite renewed UN sanctions. This resilience challenges sanction efficacy, sustains government revenues, and affects global oil supply, presenting complex considerations for international energy markets and trade policies.

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Stock Market Volatility and Growth Concerns

The German stock market, exemplified by the DAX index, has experienced sharp declines amid global growth worries, mixed earnings, and cautious investor sentiment. External factors such as US government shutdown risks and ECB monetary policy uncertainty contribute to volatility, affecting capital flows and investor confidence in Germany’s economic prospects.

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Political and Parliamentary Scrutiny

Some MPs have called for a Royal Commission of Inquiry (RCI) citing concerns over sovereignty, transparency, and the negotiation process. They argue the ART may skew towards US interests and lack comprehensive public consultation. The government rejects these claims, emphasizing ongoing parliamentary briefings and stakeholder engagement to address concerns.